Posted on April 22nd, 2026

From 6 April 2026, many sole traders will need to use Making Tax Digital (MTD)–compatible software to stay compliant with HMRC’s new rules. With so many options available, it’s understandable to feel overwhelmed. So, where do you start – and what should your software actually do?

If you’re already a Kanopi Accounting Services client, the good news is that you’ll be using FreeAgent – often free if you bank with NatWest or Mettle, or available at a significantly reduced cost. But if FreeAgent isn’t an option for you, don’t worry. There are plenty of alternatives, and choosing the right one starts with understanding what’s required.

What does Making Tax Digital software need to do?

To comply with Making Tax Digital for Income Tax, you (or your accountant acting on your behalf) must use commercial software that works with HMRC systems. That software must be able to:

Create, store and correct digital records of your self‑employment and/or property income and expenses
Send quarterly updates to HMRC, which summarise your income and expenses (these are not tax returns)
Submit your final tax return, including any other income sources, by 31 January following the tax year

The main types of MTD software

There are two broad categories of software available, depending on how you currently keep your records.

1. Software that creates digital records

This type of software allows you to manage your records directly within the system. You can usually:

Link your business bank account to import transactions automatically
Scan receipts and invoices
Manually enter income and expenses

Most of these products also allow you to:

Send quarterly updates to HMRC
Submit your annual tax return

Some tools can even connect to records you already keep elsewhere, giving you more flexibility.

You (or your accountant acting on your behalf) must use commercial software that works with HMRC systems

2. Software that connects to your existing records (bridging software)

If you already use spreadsheets or another bookkeeping tool, you may prefer bridging software. This connects your existing records to HMRC and submits the required information on your behalf.

Many bridging products allow you to:

Send quarterly updates
Submit your tax return

This can be a good option if you’re comfortable using spreadsheets and don’t want to change your current setup.

Thinking ahead

Finally, consider how your business might change in the future. If you’re currently a landlord but are thinking about starting a business (or vice versa), make sure your chosen software can support that additional income later on.

Making Tax Digital doesn’t have to be daunting – with the right software and the right advice, it can become a straightforward part of running your business.